Special Report: ETTSA warns of ‘channel discrimination’

Christoph Klenner, secretary general of the European Technology and Travel Services Association (Ettsa), spoke before the European Parliament’s Committee on Transport and Tourism’ in July in a hearing on ‘Airline distribution channel discrimination’.

Klenner, who has since moved on from ETTSA, told MEPS:

“The airlines created the CRSs back in the 1970s and 80s and the CRS code of conduct was created precisely to prevent airlines extending the market dominance they had at that point, pre-deregulation.

“The regulation brought neutrality and transparency of information which led to more competition, more choice and lower prices for consumers.

“An independent study by Infrata in the UK did the job of comparing direct versus indirect distribution and, unsurprising to us, [it found] indirect distribution is a very efficient way of distributing content and on a par with direct distribution in terms of cost.

“When a German airline [Lufthansa] was summoned to court in Austria over the surcharge it was asked to present evidence that its surcharge was justified because of the cost difference. To this day they have not submitted any evidence to the court, which is surprising.

“The last 10-15 years has seen new distribution channels emerge. Some remain regulated, some are unregulated, some – the airlines’ own distribution channels – are evidently biased. Healthy competition between distribution [channels] is important.

“Today about 50% of airline distribution in Europe goes direct, so to hear that CRSs are bottlenecks to the consumer is an exaggeration to say the least.

“The [airline] surcharges [on GDS bookings] are a symptom of a broader problem and that is channel discrimination.

“You can say an airline should have freedom to decide who it does business with, who it gives what content to and which channel it sells through, of course.

“But on the other side of this two-sided marketplace sits a consumer who is not well-served by fragmentation, who wants to be able to compare in one place all the offers available because only in that way can the marketplace be disciplined.

“How do you have thriving competition in the airline industry if there is no transparency?

“Biased distribution or channel discrimination leads eventually to a larger share of the market being controlled by a few large airlines.

“We already see airlines which have a strong market position able to reinforce their market position by various means including channel discrimination.

“Fragmentation is not a good thing. If a consumer chooses to buy in a direct distribution channel, that is their choice and that option is available. But if you make it difficult to compare for those who want to compare, that is a serious problem.

“On the complaints against Lufthansa for the surcharge, it is striking that the commission has analysed these for almost three years and not rejected them, but has decided not to enforce the rules because these might be changed in the future.

“If that becomes normal then enforcement of legislation becomes totally ineffective, and then why are you sitting here making laws?

“I call on the Commission to reconsider and to take these complaints seriously because this regulation remains in force until it’s revised.

“The code of conduct needs to continue ensuring neutrality, transparency and access to information for consumers.

“The current code and any future legislation should be enforced in the interests of legal certainty for all market participants and in the interests of the consumer. What is the point of legislation if you don’t enforce it?”

Christophe Dussart, head of sector for the internal market of aviation in the European Commission’s Department for Mobility and Transport, DG-Move, told the committee of MEPs:

“On revision of the CRS Code of Conduct, the point of departure was the aviation strategy the Commission adopted in 2015.

“In 2017, the Commission published a road map [for revision]. There will be a public consultation in 2018. In March 2019 we will have conclusions based on the consultation, which means we can’t discuss a new text in the current parliament, it will have to be during the next Euro Parliament.

“There are two possibilities – nothing would change [or] we revise the text.

“The evaluation is just starting, but there are some important principles. First, companies [should] be able to choose their distribution channels freely.

“Second, all actors in the same market have to follow the same rules.

“There is an interesting point here because the three CRSs undertook to follow certain rules under the Code of Conduct whereas others are not subject to the same rules.

“Consumers are at the centre of everyone’s concerns. The single market in aviation is a success, that is clear, and that was only possible to the extent that consumers can compare fares, so that must continue.

“Article 5 of the current regulation requires companies subject to the Code of Conduct to display neutrally and on a non-discriminatory basis. That is something we want to develop and perhaps extend, but the discussion has not yet taken place.

“The evaluation will take place in a context where air carriers are subject to concentration and we’re considering regulation to maintain maximum competition and, above all, to avoid an approach which could make it more difficult for consumers to compare prices.

“These general principles are not necessarily all compatible with one another, but we are going to examine them.”

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